Not long ago, Deutsche Bank, Thomas Friedman, and many economic experts announced that globalism is dead. Even technology visionary Peter Thiel recently said, "The tide on globalism is going out."
Deutsche Bank chief strategist George Saravelos frames globalism’s death notice this way: "The world has been on a ‘globalizing’ trend since the end of World War II. But this year, there is compelling evidence to argue this is being reversed." And, "World exports as a percent of GDP have peaked and have been on a steady, slow decline over the last two years. The number of new trade deals is at its lowest in more than two decades." More importantly, "Banking regulation is increasingly balkanized, raising the cost of cross-border business. Fines on multinationals have reached record levels this year." And finally, "The U.S. presidential election (was) dominated by anti-trade and immigration concerns. The political discourse is shifting in many other countries, too."
The globalism sky is falling. That seems pretty dire. Yes, exports as a percent of GDP are down, yet 2016 World Trade Organization figures show a global trade drop of only 2.6 percent in 2014 vs. 2015 (2016 not yet released). I am just wondering if that fall-off has more to do with stagnating economies stunting purchasing power in much of the consuming world than the death of globalism. The International Monetary Fund predicts the U.S. economy will grow significantly next year and the year after. More disposable income means more buying and more global trade.
The number of new trade deals is at its lowest, says Deutsche Bank. That’s true. But if bilateral agreements replace mega deals, is that necessarily a death notice or re-alignment given the economic realities of the countries involved? TPP was not in operation, so no impact there. NAFTA is still in force. "Protectionism," as Saravelos calls it, has not even started yet, so perhaps the case is overstated.
Saravelos is on target when he cites over-regulation, taxes, fines, and penalties as impacting globalism. But that fault lies with Big Statism, not protectionism. It appears the trend is now toward less regulation, lower taxes, and compliance simplification. And on the balkinization of finance point, exciting new global finance trends—blockchain initiatives, Tradeshift, IBM Watson and Visa pay—are bending and breaking the rules of global finance and greasing the wheels of global trade growth. It is happening now.
Let’s redefine what globalism means by removing the cultural part of the definition, focusing only on the economic. Do that and you may be surprised: Global trade will grow.